Cell Phones and a Cashless Society

Is a Cashless Society on the Cards?

January 11, 2010

Telegraph - Steve Perry, executive vice president of Visa Europe, has a different take on the folding stuff packed in our wallets that most of us take for granted.

"Cash is expensive," he says. "We need to be using it less."

Expensive? Vintage wines, maybe. Designer clothes, yes. Modern art, almost certainly. But cash?

"Why do you think supermarkets introduced cashback?" Perry asks rhetorically.

He has me stumped there. I tell him I always thought of it as a service for overdrawn students to drive a few more sales through the tills.

"No," he responds politely. "It's because they want cash out of the system so there is less to manage. Processing a transaction on a card can be cheaper than handling cash."

Perry is a leading cheerleader for the cashless society. It's hardly a surprising role, but its an argument he is finding increasingly easy to make. Last month, for example, the Payments Council announced to anguished outrage that in 2018 the cheque would be dead.

"There are many more efficient ways of making payments than by paper in the 21st century, and the time is ripe for the economy as a whole to reap the benefits of its replacement," Paul Smee, chief executive of the Payments Council, said.

Perry extends the same argument to cash. Notes and coins are never going to be fully replaced, he accepts. Currency has, after all, been around in some form or another since 3,000BC. But now that we're in the electronic age, payments could do with a little catching up, he reckons.

Visa has recently published an extensive report on the cost of cash to society. Citing numerous independent papers by consultants and national governments, the payments company constructs a compelling case.

"The European Commission has calculated that the total cost to society of all payment methods including cash, cheques and payment cards equates to 2pc-3pc of GDP," the report states. "To put this figure into context, it should be remembered that the entire EU agricultural sector equates to 2.1pc of GDP, which means we spend more on payment than we produce on food."

The EC estimates that cash accounts for more than two-thirds of the total cost. McKinsey, the consultants, have estimated that "society spends about €200 (£180) a year per person to cover the cost of cash" and the "real" cost of cash to a retailer is 1.3pc of the purchase price – no less than the transaction fee on a card. The Dutch central bank has published a similar study, estimating the annual cost of cash at €300 per family.

Because cards are less risky (the associated cost is estimated at 0.02pc-0.1pc per transaction on cards compared with 0.1pc-0.2pc with cash) and encourage spending, they are more efficient and better value, Visa argues. Furthermore, card transaction fees are expected to fall, with some countries in Europe such as Denmark already offering free debit card services to retailers.

In the UK, Perry estimates, £1 in every £2.50 is spent on cards. He hopes to see the ratio reversed, with £2 in every £3 on cards by 2015. Of course, that would mean more business for Visa but, he claims, it would also mean less waste through cash security and cash handling costs.

A few years ago, changing consumer behaviour to such a degree would have been unthinkable. Perry says the internet and "chip and pin" have changed all that. Online retailers have helped the public grow familiar with card purchases, while chip and pin has reduced the incidence of fraud from 0.07pc to 0.05pc.

In the EU, according to the European Central Bank, €1.68 trillion was spent on cards in 2008 and use has been growing at 12pc a year for the past five years. Debit card spending this year in the UK is expected to overtake cash spending by value for the first time.

Perry believes the UK consumer is ready, citing the massive increase in the use of debit cards. Visa, best known for credit cards, now generates 70pc of its European business through debit cards.

Other countries are not so enlightened, he notes. Germany is still so nervous about card payments that some online retailers offer a service where they collect the cash at the customer's door on delivery. Others are more technologically savvy. South Korea introduced a preferential VAT treatment for consumers paying with cards to encourage the move to cheaper, cashless payments. Subsequently, the share of cash payments fell from 40pc in 2002 to 25pc in 2006.

For Visa, the challenge now is the 80pc of all transactions that are still made in cash – largely small ticket items such as newspapers and snacks. Visa has been pioneering contactless payments, that allow swift purchases by waving the card over a reader and dispensing with a pin – making buying with a card even more effortless than with cash.

Perry believes 2010 will be the year contactless takes off, with the total number of cards in use rising from 5m to 15m. Barclaycard has already 1m customers on its "onepulse" card.

Visa's new vision is to insert chips into mobile phones and do away with cards altogether. Antony Jenkins, chief executive of Barclays' global retail bank, already has a "onepulse" enabled phone and more prototypes are being trialled at Visa's innovations suite. The difficulty is persuading mobile phone manufacturers to build a handset that can store a chip and antennae.

Jenkins believes contactless mobile phones are the future and will open the door to fully mobile banking. Soon enough, people will be receiving, making and managing their payments on mobile phones, he reckons. In Africa, six million people are already paying for goods on their mobiles, proving that electronic payment systems can be more reliable and secure than cash.

Of course, cash will never be fully replaced. It's the currency of the black economy for a start, which is one reason why the authorities would like it used less and less. In Italy, for example, the black economy is estimated to be 40pc of GDP and 12pc in the UK. It's also proved remarkably adaptable over the past five millenia. For Visa, though, there is still ample room for cards.

After all, we want to keep you safe.

National Irish Bank Moves to Cashless Banking

December 22, 2009

Irish Times - National Irish Bank has written to thousands of its customers this month informing them of a “new style of banking” in which branches will not handle over-the-counter cash transactions.

The letter says branches will no longer handle cash withdrawals and lodgements, night safe lodgements and foreign currency cash. Branches will continue to lodge cheques, drafts and postal orders and issue drafts.

Customers are advised to obtain cash from “ATMs nationwide” or to seek “cash-back” on their debit cards.

A spokesman confirmed that cashless banking was being introduced across the entire NIB branch network over the next 18 months, and had already been introduced successfully in a number of branches. He said the feedback from customers was positive with few complaints.

“These branches provide better security for staff and allow us to spend more time, in a better setting, with our customers . . . Customers like them, as our staff have more time to discuss customers’ overall needs.”

However, NIB customer Frank Barry from Malahide described the change as hilarious and ridiculous:

“A bank refusing to accept cash . . . I thought that’s what they are for?”

Mr Barry contacted The Irish Times after his wife Catherine Gralton received two letters informing her that the local branch would stop handling cash from next February.

“If I did have a cash lodgement, I would have to go to another bank, buy a bank draft and then go to NIB to lodge it,” he said.

An NIB spokesman said the changes followed the model used by NIB’s parent, Danish-owned Danske Bank. Cashless banking is far more common in Scandinavia while Irish dependence on cash is among the highest in Europe.

The spokesman said it recognised that some business customers may need to lodge and withdraw cash and it would offer these a number of options. However, he declined to say what these options were, citing security reasons.

NIB announced earlier this month it was cutting 150 jobs and closing 25 of the bank’s 58 branches because of the recession and changes in the banking sector.

ACC Bank, which specialises in business lending, has also moved to cashless operations.

The Irish Banking Federation said it was not aware of any other main banks introducing cashless banking at this stage, though a spokesman added that “they would all love to.”

Handling cash is more expensive than the non-cash alternatives such as internet banking or debit and credit cards.

Cash also poses greater security threats for the banks, whereas consumers bear many of the risks associated with non-cash transactions.

NIB in particular has suffered a number of high-profile robberies and one of the branches it has already converted to cashless banking, on Dublin’s Howth Road, was the scene of a so-called tiger robbery in 2006.

Citibank's 'Tap and Pay Project' Allows Consumers to Use Their Mobile Phones to Pay for Purchases

Early results of the project, taking place in India, find that 3,000 participants utilize their RFID-enabled phones for payments more often than consumers with credit cards.

December 30, 2009

RFID Journal - Six months into a Near-Field Communication (NFC) payment trial being held in Bangalore, India, global finance company Citibank is finding that participating consumers use their mobile phones to pay for purchases at a higher rate than consumers using traditional credit cards.

The Citi Tap and Pay project, which launched in June 2009 and is slated for completion in early 2010, involves approximately 3,000 consumers and 250 merchants. This, says Mohammad Khan, the president of ViVOtech—which supplied contactless payment software and hardware—makes it one of the largest trials of NFC RFID technology ever launched.

The pilot employs NFC-enabled Nokia 6212 phones, mobile network operator Vodafone's wireless communications service, MasterCard's PayPass contactless credit card system and security infrastructure, and ViVOtech's NFC wallet software, mobile coupon software, smart poster software and NFC readers. After the pilot concludes, Citibank intends to analyze the findings and make the results available to members of the industry.

Pilot participants purchase an NFC-enabled Nokia phone, which uses ViVOtech software to link the unique ID number on the phone's NFC tag with data about the customer on a Citibank back-end server.

Those taking part in the pilot buy the phone for about 5,000 rupees ($105) at Nokia's stores, then follow prompts on the phone in order to install ViVOtech's e-wallet software (enabling them to create a credit card account linked to the phone), via a Vodaphone cellular connection. A user responds to questions asked by Citibank, including his or her name and address, and creates a password.

The individual can then take the phone to merchants, such as convenience stores and restaurants, and tap it against a ViVOtech NFC reader. The unique ID number on the phone's NFC chip is captured and transmitted back to Citibank's server, where the payment is credited to the user's account. He or she then receives a bill at the end of the month for a total of the charges made, as would be the case with a standard credit card.

ViVOtech is also providing smart posters containing passive 13.56 MHz NFC RFID tags, as well as the software the enables consumers to access Web-based information and services related to those posters. The tags are encoded with a unique ID number linked to data on the back-end server regarding the business or service advertised on that particular poster. Consumers can tap their phones against the smart posters to download such things as coupons entitling them to discounts toward purchases at specific stores. The posters can also be used to allow a phone user to access directions to a neighboring merchant.

The pilot is intended to help Citibank gain customer and merchant feedback about the system, including how well it works and how it can be improved.

"The pilot will also give us further concrete insight into the business model, which will govern any such large-scale NFC customer implementation," says Satish Menon, the executive VP of Citi Growth Ventures, a worldwide Citibank team organized to help launch new innovation.

This is Citibank's largest NFC pilot in the entire world to date, the company reports, and is intended to determine whether the technology works effectively in high volumes. The pilot is being undertaken in Bangalore because of its high density of tech- and mobile phone-savvy residents.

"The Citi Tap and Pay pilot is a demonstration of our belief that contactless mobile payment services will be a key lifestyle driver for our highly mobile, international and increasingly urban customer base," Menon states.

With the pilot, he notes, Citibank aims to build momentum for faster and wider adoption of contactless technology for mobile phones worldwide, by developing a business model for the system. Thus far, he says, the pilot's participants have made more than 40,000 Tap and Pay transactions, and every customer who has signed up for the program has used his or her phone to make a purchase at least once.

"We're also seeing that Tap and Pay customers are more active than their plastic-using counterparts."

Thus far, ViVOtech has tested its technology in 37 trials worldwide, including most recently in Dubai, using smart posters in malls. At the conclusion of the pilot, Khan says, Citibank intends to review the results with industry members.

"With their support, we would then explore opportunities to further develop the mobile payments platform," Menon adds. "We believe in the limitless opportunities that such an environment presents, but also recognize the immediate challenges in terms of commercialization, cost, scalability and system-readiness."

What's more, Khan says, there may still be several more Citibank and ViVOtech pilots in the works in the coming months—not only in India, but also in other parts of Asia and on other continents.

“EcoSnoop” iPhone App Designed for Ratting Out Neighbors

December 29, 2009

Max Linsky - Listen up, all you eco-warriors: Your days of griping in vain about neighborhood energy waste may be coming to an end. Finally, there’s a tool that we normal folks can use to report environmentally negligent behavior. Ladies and gentlemen, say hello to EcoSnoop.

The EcoSnoop app lets individuals report on wastage of water, energy, trash or toxic pollutants. You can view cases filed near you via GPS and add documentation using photos and commentary. You can create your own complaints if, for example, your grocery store is leaving the parking lot lights on during the day or your neighbor is dumping oil down the drain.

“It’s an interesting idea. Some reports say as much as 30 percent of total electricity is wasted, and certainly we have all witnessed examples of this in our own communities. Crowdsourcing may be one of the best tactics for identifying such waste, but it’s not clear how these complaints will ever make their way to the property owners responsible.”

Stasi-like Plan to Check Every Phone Call and Email in Britian

December 27, 2009

Mail Online - Telecoms firms have accused the Government of acting like the East German Stasi over plans to force them to store the details of every phone call for at least a year.

Under the proposals, the details of every email sent and website visited will also be recorded to help the police and security services fight crime and terrorism.

But mobile phone companies have attacked the plans as a massive assault on privacy and warned it could be the first step towards a centralised ‘Big Brother’ database.

They have also told the Home Office that the scheme is deeply flawed...